Most outstanding claims for FICA tax refunds will be denied, IRS announces

In response to last year’s Supreme Court decision unanimously holding
that severance payments to employees are subject to Federal Insurance
Contributions Act taxes (Quality Stores, Inc., 134 S. Ct. 1395
(2014)), the IRS announced that it will disallow all of the more than
3,000 refund claims (except for those that satisfy a narrow exception
in Rev. Rul. 90-72) filed while the resolution of this issue was
pending, as well as the appeals filed in response to the denial of
refund claims (Announcement 2015-08). This disallowance also
includes claims for refund of Railroad Retirement Tax Act (RRTA) and
Federal Unemployment Tax Act (FUTA) taxes.

Claims may still be pursued by taxpayers whose claims for refund are
based on the narrow statutory exception for supplemental unemployment
compensation benefits that are linked to the receipt of state
unemployment compensation and satisfy certain other requirements
contained in Rev. Rul. 90-72. According to the Supreme Court, those
amounts are excludable from wages for FICA, FUTA, and income tax
withholding, and are not compensation for RRTA purposes.

Taxpayers with pending refund claims based on the Rev. Rul. 90-72
exception should contact the IRS employee listed in the announcement
on how to proceed with the appeal request for that portion of the
claim. If they do not, the IRS will take no further action. Taxpayers
also have two years from the date on the disallowance letter they were
mailed by certified or registered mail to file a claim for a refund in
federal district court or the Court of Federal Claims. This period is
not extended by filing an appeal request with the IRS.

The results of the 2016 presidential election are likely to have a big impact on federal tax policy in the coming years. Eddie Adkins, CPA, a partner in the Washington National Tax Office at Grant Thornton, discusses what parts of the ACA might survive the repeal of most of the law.